A program of selective government interventions designed to change the sectoral composition of a country's economy by influencing the development of particular industries or sectors. Targeted sectors or industries may be aided through some combination of government loans and equity participation; tax incentives to promote investment; trade protection and export subsidies; preferential government procurement practices; or relief from regulatory constraints such as antitrust and environmental laws. Advocates claim that industrial policy can "shape comparative advantage" --recognizing that, even if all countries may gain through international trade, a country will gain most if it specializes in high-value-added, high-growth sectors. Critics claim that governments cannot do a better job than market forces in "picking winners," and that misguided attempts to do so --as occurred in the foI1I1er East Bloc countries --could make matters worse.
Government policy to influence which industries expand and, perhaps implicitly, which contract, via subsidies, tax breaks, and other aids for favored industries. The purpose, aside from political favor, may be to foster competitive advantage where there are beneficial externalities and/or scale economies.
A government response to industry influence.
Encompasses traditional government policies intended to provide a favorable economic climate for the development of industry in general or specific industrial sectors.
A government policy that sets economic priorities and favors chosen industries, rather than leaving the pattern of growth and investment to the free market. Critics of industrial policies charge that they often waste resources.
An industrial policy is any government regulation or law that encourages the ongoing operation of, or investment in, a particular industry. It is often related to, or wholly determinant of, investment policy for that industry.